What are the 5 C's of credit?
When applying for a mortgage, it’s crucial to understand what potential lenders look for. They utilise a framework known as ‘The 5 C’s’, which provides a holistic view of your financial health and borrowing potential.
- Character - is your financial behaviour and history. Lenders’ scrutinise your credit file, employment stability, savings discipline and payment history.
- Capacity - this is your ability to repay the loan without financial distress. Lenders will examine your income, expenses, and existing debts.
- Capital - your assets and liabilities, and how much you’ve saved for a deposit. Demonstrating you have savings, assets and minimal debt will help.
- Collateral - the property you intend to purchase. Lenders assess the property’s value and condition as security against the loan. Choose good quality areas and properties in good condition.
- Conditions - the loan’s purpose and broader economic or personal factors that might impact your application.
Boost your chances of home loan approval when you understand the 5 C's.
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